Yellen Testifies on Capitol Hill on FSOC Annual Report

In February, the House Financial Services Committee and Senate Banking Committee heard testimony from Treasury Secretary Janet Yellen in her capacity as Chair of the Financial Stability Oversight Council (FSOC). The hearings in both Committees focused on the regulation of nonbank financial companies, SIFI designation, Basel III proposal, digital assets, and climate change. House Financial Services Chairman Patrick McHenry (R-NC) argued that FSOC has expanded its regulatory reach to fit the Biden administration’s political priorities and is acting like a “roving regulator” under current leadership. He also vocalized his disagreement with FSOC’s decision to relax criteria used to designate nonbank financial companies as systemically important. Over on the Senate side, Senate Banking Committee Chairman Sherrod Brown (D-OH) applauded FSOC for updating its nonbank designation procedures because of the threat nonbank financial companies, including hedge funds, private equity firms, insurance companies, and clearinghouses, pose to the financial system. He expressed support for increased capital requirements and the FSOC’s work on digital assets, artificial intelligence, and the impact of climate change on financial markets. On artificial intelligence, Secretary Yellen noted “the Council is closely monitoring the increasing use of artificial intelligence in financial services, which brings potential benefits such as reducing costs and improving efficiencies and potential risks like cyber and model risk.”

Click here to read Treasury Secretary Yellen’s written testimony.
Click here to watch the House Financial Services Committee hearing with Secretary Yellen.
Click here to watch the Senate Banking Committee hearing with Secretary Yellen.